Quick Ratio
Definition
A strict liquidity test that compares your cash and receivables, leaving out inventory, with what you owe in the short term.
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Formula
Quick Ratio = (Cash + Receivables) ÷ Current LiabilitiesFor inventory businesses, the quick ratio is often much lower than the current ratio, and that gap is a good picture of how much your liquidity depends on selling stock.
A low number is common during inventory build-ups. Watch for: a quick ratio that stays low after peak season ends, which means inventory did not turn back into cash.
Example
$90,000 cash and $30,000 receivables against $200,000 of current liabilities gives a quick ratio of 0.6.